ONEW - NASDAQ

Good morning. My name is Julie, and I will be your conference operator today. At this time, I would like to welcome everyone to the OneWater Marine Inc. Fiscal First Quarter 2026 Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. Thank you. I would now like to turn the conference over to Jack Ezzell, Chief Financial Officer. Please go ahead.

Good morning, and welcome to OneWater Marine's Fiscal First Quarter 2026 Earnings Conference Call. I am joined on the call today by Austin Singleton, Executive Chairman, and Anthony Aisquith, Chief Executive Officer. Before we begin, I would like to remind you that certain statements made by management in this morning's conference call regarding OneWater Marine and its operations may be considered forward-looking statements under securities laws. These involve a number of risks and uncertainties. As a result, the company cautions you that there are a number of factors, many of which are beyond the company's control, which could cause actual results and events to differ materially from those described in the forward-looking statements. Factors that might affect future results are discussed in the company's earnings release, which can be found in the Investor Relations section on the company's website and in its filings with the SEC. The company disclaims any obligation or undertaking to update forward-looking statements to reflect circumstances or events that occur after the date forward-looking statements are made except as required by law. Please note that all comparisons of our Fiscal First Quarter 2026 results are made against our Fiscal First Quarter 2025 unless otherwise noted. With that, I would like to turn the call over to Austin Singleton, who will begin with a few opening remarks. Austin?

Thank you, Jack. Good morning, everyone, and thank you for joining us today to discuss our First Quarter 2026 results. We delivered a solid first quarter in line with expectations, demonstrating the resilience of our business model and continued progress against our strategic priorities. Revenues increased slightly, and same-store sales were flat even with the impact of our strategic inventory initiatives. Importantly, we are pleased with our inventory levels, and despite a highly competitive environment, we believe we are operating from a position of strength. Our inventory mix and age profile are healthy, and our OEM partners continue to be supportive while maintaining disciplined production schedules. This has allowed us to sharpen our focus on disciplined execution as we navigate the current environment and position the business to benefit as industry conditions improve. We successfully completed our strategic brand initiatives last year. While the first quarter is typically the smallest from a seasonal standpoint, we are beginning to see the benefits of those brand rationalization efforts reflected in our gross margins. First quarter margins were better than expected, also driven in part by a favorable model mix. We expect the positive impact of discontinued brands to be realized in different levels throughout the year, and we remain confident in the long-term benefit of these strategic actions. As part of our ongoing portfolio optimization efforts, we have decided to sell certain distribution segment assets that are no longer core to our long-term strategy. This decision reflects our focus on simplifying the business and allocating capital to areas with the strongest strategic fit. This action is not a reflection of underlying operational performance but rather an opportunistic step to sharpen our focus and strengthen the balance sheet. We expect proceeds from the transaction to enhance financial flexibility and support our capital allocation priorities going forward. With the strategic actions we have taken to optimize our portfolio, improve our cost structure, and enhance our balance sheet, OneWater is well-positioned to continue gaining share and expanding profitability as conditions normalize. With that, I will turn it over to Anthony.

Thanks, Austin, and good morning, everyone. During the quarter, lower unit volumes were offset by pricing and mix as we improved our margin profile. While the first quarter includes the seasonally slower winter months, we were encouraged to see less price resistance from our customers during the purchase process. This was driven in part by a more stable news environment around tariffs and interest rates, which helps support customer sentiment. The early boat show season has kicked off, and we will continue to stay close to our customers to gather insights as we move into the peak selling season. Inventory across the industry is normalizing, and as Austin mentioned, we entered the calendar year from a position of strength with a healthy mix of new boats across our premium portfolio of brands. New exciting models from our top manufacturers, in addition, trade-in availability has continued to improve, supporting continued growth in pre-owned boat sales. Gross margins benefited from our strategic initiatives to optimize inventory and enhance profitability, partially offset by the variability of commodity product margins in the distribution segment. We expect the overall positive impact to continue in the quarters ahead, but there will be some variability quarter to quarter. Overall, we expect new boat margins to improve by 100 basis points on the year as a whole. Expanding profitability is a top priority for the year, and we are driving that across dealerships by doing what we do best: taking care of our customers. We have an incredible team leveraging our CRM, advanced inventory management tools, and the best inventory network in the industry to locate and deliver the boat of their dreams. And with that, I would like to turn the call over to Jack.

Thanks, Anthony. Fiscal first quarter revenue was $381 million, representing a 1% increase compared to the $370 million in the prior year period. New boat sales were down 6% compared to the prior year, and pre-owned boat sales were 24% higher, driven by both increased unit sales and average unit price. Service, parts, and other revenue grew by 10% compared to the prior year period. This growth demonstrates improvements in our distribution segment, the strength of our service operations, and the loyalty of our customer base even during periods of softer new boat demand. Finance insurance income decreased slightly as a percentage of total sales due to the mix shift in products sold. First quarter gross profit increased to $89 million compared to $84 million in the prior year period. Most importantly, our gross profit margin expanded to 23.5%, an improvement of 110 basis points compared to the prior year quarter. This margin expansion was driven by gross margins on new boats sold, pre-owned boat sales volumes, and the positive impacts of our portfolio optimization efforts. Selling, general, and administrative expenses totaled $81 million compared to $79 million in the prior year period. The increase was due to higher variable expenses, including sales commission, that increased due to higher gross margins on boats sold. During the quarter, we recognized a $7 million impairment charge related to certain distribution assets classified as held for sale. Net loss for the quarter totaled $8 million or $0.47 per diluted share compared to a net loss of $14 million or $0.81 per diluted share in the prior period. This variance was largely driven by a $13 million income tax benefit in the quarter compared to a $5 million income tax benefit in the prior year period. Adjusted loss per diluted share was $0.04 compared to an adjusted loss per diluted share of $0.54 in the prior year period. Adjusted EBITDA increased to $4 million compared to $2 million in the prior year. Now turning to the balance sheet. During the quarter, we classified certain assets and liabilities within our distribution segment as held for sale, following a board-approved plan to divest these operations. These amounts are measured at the lower of carrying value or estimated fair value less cost to sell. We expect the transaction to close prior to March 31, 2026, with net proceeds applied toward repayment under our credit facility. There is no impact on the first quarter revenue or adjusted EBITDA from the held-for-sale classification. While these amounts are classified as held for sale at this point, we have not entered into a definitive agreement. Since these negotiations are ongoing, we cannot provide additional comments regarding the potential for completing a transaction. We will provide future updates if a transaction is completed. As of December 31, 2025, we maintain total liquidity of $46 million, including $32 million of cash and cash equivalents plus availability on our credit facilities. Total inventory decreased to $602 million as of December 31, 2025, compared to $637 million as of December 31, 2024. This reflects inventory reclassified as held for sale and the impact from our disciplined inventory optimization. Our long-term debt position was $399 million as of the quarter end, and net debt representing 5.1 times our trailing twelve-month adjusted EBITDA. Reducing leverage remains our top capital allocation priority in the year, and we are confident in our path forward. Based on our solid first-quarter performance and current market visibility, we are maintaining our fiscal year 2026 guidance ranges and remain cautiously optimistic. Our outlook is anchored in our expectation that the industry will be flat to down low single digits year over year. While we anticipate outperforming the industry, we expect same-store sales to be impacted by brand rationalization headwinds, resulting in flat same-store sales overall. We anticipate total sales to be in the range of $1.83 billion to $1.93 billion, and we expect adjusted EBITDA to be in the range of $65 million to $85 million and adjusted earnings per diluted share to be in the range of $0.25 to $0.75. As we move closer to the selling season, our strategic priorities are clear. Driving profitability and reducing balance sheet leverage are the focus for OneWater. As we await signs for a broader marine recovery, we see significant upside potential as the industry recovers and market volumes return towards historical long-term averages. We will continue to execute with precision and position OneWater to emerge from this cycle as an even stronger and more profitable organization. This concludes our prepared remarks. Operator, will you please open the line for questions?

Thank you. Your first question comes from Joe Altobello from Raymond James. Please go ahead.

I had a quick question on the sort of mix shift you are seeing within your segments. If you look at obviously new versus pre-owned, pre-owned significantly outperformed this quarter. Is that a shift you are seeing among buyers toward lower-priced units? Or is that just better availability of used inventory?

Yes. Definitely better availability. You know, we are just taking in more trades. You know, we have spoken to this in the past. That you had a lot, especially in the peak of COVID and stuff. You had a lot of pre-owned boats that went from person to person instead of running through dealerships because of the time lag and because there is not really a time lag anymore. We are getting more trades, so we have more to offer to the consumer.

Got it. Okay. And in terms of the outlook for this year, obviously, you kept your guidance intact, but your industry outlook is a little bit softer. How are you thinking about things like year-end net leverage and year-end inventory, for example?

Well, I think I will let Jack jump in. We kinda need to leverage. Yeah. Go ahead, Jack.

Yeah. I think from a leverage perspective, right, with the sale of the distribution assets, that should bring our leverage down to almost four times at the end of March and then under four times by the year-end. So I think that is going right down the way we like and getting to where we want it to be. As far as inventory, inventory is great now, and we are going to manage it, you know, according to what is happening at retail. You know, Q1, SSI data, you know, for those segments we operate in was I want to say, like, negative, you know, low double digits, high single digits. So that is a little softer. But, again, Joe, it is such a weird quarter with December and the holidays and everything, so we want to get too far ahead of it. And try to unsee see what is happening there. If you think about, you know, long-term numbers, we are at 145,000 units. You know, new units versus a long-term average of, like, 180. And, you know, we still expect to kinda start at some point, start reflecting and turning back towards that long-term average.

Got it. And maybe one last one for me. What are you seeing so far from the boat show season?

It has been pretty good. You know? I well, let me say it has been what we thought. Flat. You know? It just seems like it is flat. Maybe even you could say slightly down, but the enthusiasm is there. The consumer still is there. And I think one of the things that probably shocked us a little bit, and, again, we do not want to get out in front of our skis here, on the margin, but the margin is better than we expected. Now a little bit of that comes into model mix, and it comes into, you know, people at the boat shows are typically buying the new hot unit where you do not have as much competition, you know, it is not as a competitive environment versus just the same old same old because it is mostly limited stuff. But, you know, it has been good. I think we feel like we have called it pretty good that this is going to be, you know, for us, flat to slightly up, and, you know, it is really this year could be a margin play while everybody else starts to get their inventory in line. And, you know, it could end up being a decent year.

Great. Thank you.

Thanks, Joe.

Your next question comes from Craig Kennison from Baird.

I wanted to follow up on the question Joe had about the pre-owned market. Sounds like availability is much better. And I think, Austin, you mentioned that maybe there are just fewer person-to-person transactions and more, you know, person-to-dealer transactions. But I guess what I am curious about is are consumers who are trading a boat trading to buy another boat or, you know, is that pandemic era buyer just maybe exiting the industry at a different rate?

Well, I do not think it would be considered a trade-in if they were not trading it for something. You know, that would be a downright out sell. And I will tell you, Anthony, how many buyers do we have today?

What do you mean buyers? I am not understanding. They just guys that sit around and dive in my boat. Yep. Yeah. There are about 12 of them. Yes.

So it is all we are needing. We yeah, 12 guys. Their livelihood depends on them buying boats. They are not being able to buy anymore today than they were two years ago. It is still just a tough environment to find that product that I will go back and that you know, I am going to be a broken record. Hopefully, it never changes, but again, it is one of the biggest problems we have or biggest issues is there is not enough pre-owned inventory out there. We could take twice what we have. And, you know, you get in there and you know, it is just a tough environment to really get any kind of meaningful numbers going at it. I mean, we looked at it and I think we are still, like, one half of 1% of the total pre-owned market. And, you know, so there is a lot of runway there, but the real difference today than COVID was the consumer has less time or they have all the time they want, but the consumer does not have to wait nine months, twelve months, sixteen months to get their new boat. Most of the time, we can source it out of our inventory on a new boat side, you know, side of things and get it to them in a couple of weeks. So they do not have that huge amount of time to tell 50 people that they are getting a new boat. And somebody goes, what are you doing with your old one? And that is why we started to see an uptick. You know, the uptick in trade-ins really started last year. And it is just because people are being able to get their new boat quicker, and so they are not one that they do not have the time to mess around or keep using their old boat and tell people about it. I think that is really the only dynamic that has changed.

That is helpful. Thanks. And then a different question just on inventory. How would you frame the freshness of your inventory, current versus noncurrent? And how has that trended in the last several quarters?

It is in the best shape that it has been since I can remember being in this business. And it was painful to get there. But we are there. And, you know, we still have some last year models and some stuff we are moving through, but we are in a really, really comfortable place when it comes to dated or aged inventory. And, you know, talking with Wells, there is still some cleanup in the industry, but the majority of your premium dealers are in really good shape today. Versus where they were six months, nine months, twelve months ago. I think that, you know, there is still a lot of inventory out there that is dated in the industry, but most of that is on the value side.

Got it. Thank you.

Thanks, guys.

Your next question comes from Michael Albanese from Bank Smart. Please go ahead.

Yes. Hey, good morning, guys. Wanted to ask if you could comment on any impacts from the storm that have and the cold that has rolled through the country, particularly in some of the states.

Yeah. Luckily for us, that is kind of in an area that we do not really have a whole lot of representation in. You know, the Carolinas got a little bit, but it is, you know, being that we are in January, fixing to roll into February, it is not really boating season. It is boat show season, but not boating season. So we are not really feeling any impact from that right now. You know, I think Texas was an area that we have had historically. We have had some issues with weather in the past, and it just it was not as bad there as it was too like that Northern Mississippi, Tennessee, Southern Kentucky going into, you know, the North Carolinas. Maybe touching the South Carolina. Just it is that is a nonissue for us.

What about from a boat show perspective? Do you think it has impacted traffic?

Cannot tell you because we do not really operate any boat shows that would be impacted by that. So I do not know. I do not know.

Well, I would say we do not operate in a material way, and we have some representation, like, in New York's boat show, which did have, you know, the last day cut off, but it is a very small show for us.

Okay. Got it. Thanks, guys.

Your next question comes from Noah

I guess, first, just kind of circling back to the comments made about, you know, favorable mix and maybe some, like, some less resistance from buyers on price. Any anecdotes you could point to in terms of maybe the kind of buyers being feeling a little bit better or being increasingly, I guess, more agnostic to kind of higher prices.

Well, I do not really know if that is the case. I think the way that I would look at it or a way that I can make an example of it is if a customer came in and was looking for a boat, you know, nine months ago, and it was X brand. Just call it X brand. Well, you know, we probably had 25 of them in the company across the board. The guy down the street had six. You know, that was a direct competitor. So instead of, you know, being four or five things to choose from, they had 30 things to choose from, and everybody was in a panic mode. And I think what has really kind of more happened is most of the premium brands' inventory is cleaner than it has been. And dealers have not been ordering a lot. Manufacturers have not been producing. You know, everybody seems to be off 35% to 45%. So the inventory is just cleaner, so there is not as much panic selling or fire selling because inventories are back in line. So it is really more like a discipline. I mean, by no means are we saying the customer is coming in, we are giving them a price, and they are writing us a check. You know, it is still a buyer's market. But instead of, you know, working as to, like, you know, there is no meat left on the bone, it is kind of like, here is our best offer. And then when they go to get that guy down the road, everybody kind of has their floor. So it is just kind of just the way the industry has come back, and a lot of that just to do when now everybody is not in a panic mode of having too much inventory or having the wrong dated inventory would be probably a better way to say that.

Got it. That is really helpful. And maybe just one more to pry a little bit just around the comments. In terms of kind of realizing margin benefits to different magnitudes throughout the year. Anything in general to keep in mind in terms of cadence would be helpful. Thanks.

Well, I think that is really tough for us to pinpoint because what you are going to do is you are going to have the margin is going to creep up. But as the margin creeps up and the inventory continues to clean up, we will start to lose some of those promotional dollars from the manufacturers. You know? So once the inventory, you know, like, step one is inventory clean. Step two is, you know, retail manages their new inventory really well. They have got new fresh stuff, margins start to increase. Then if you get any kind of uptick in just macro or just the total industry, then everybody starts ordering boats again, and as soon as people start ordering boats and the manufacturers are not 45% down, they are only 20% down, the promotions slide off. So there is a little bit of an offset. So that is why there will be some choppiness as we go through the selling season, and we cannot just really say, okay. It is a point and a half. We look at OneWater, we feel we gave away at least 1% last year just exiting those brands. And that is done. So you would think that, you know, somewhere around that 1% is just like an absolute lay down. Now what we are seeing today is we are seeing that it is a little bit better than that just because of the way the consumer is acting. But we do not want to really get too excited about that because it is such a small sampling. The quarter is so tiny. It is coming out of the, you know, some of the smaller boats. This quarter will really tell us how that cadence goes in. But I think that we have, you know, wanted to be a little bit conservative because there are some unknowns with how the manufacturers are going to react when boats are going to start getting over. But 1%, you know, over this year is very, very, very achievable out of something macro that we cannot control.

Got it. That is really helpful. Thank you.

Again, if you would like to ask a question, press star then the number one on your telephone keypad. Your next question comes from Gerrick Johnson from Seaport Research. Please go ahead.

Great. Thank you. Hey, did you see any adverse impact from the government shutdown in the middle of the quarter?

No. I would say we did not.

Yeah. I do not.

And then during the early season boat shows, do you see any evidence of that monthly payment buyer returning?

That is not a Hey. Hey. That is really a question for

I would answer it this way, Gerrick. You know, a lot of our customers are not necessarily payment buyers, right, because we are dealing in the premium space. But with that said, a lot of our majority of our customers finance. So when I look at, like, some of our show activity and stuff like that, I mean, we are seeing 60 plus percent of customers financing their purchases. Right? And that is kind of been, you know, we average probably on a normal cadence, you know, 60% to 65% of the customers, you know, finance some portion of their boat with us. And we think that another, call it, 30% are financing a portion of the sale somewhere, whether that be through their local credit union or something along those lines. So but I think what you are getting at is more of that low-end consumer, lower-end consumer who is a lot more price sensitive. They tend to go into more of your value product, and we just do not sell a ton of that.

Okay. Great. Thank you.